ATO staff cuts mean millions in tax dodges

Posted by Andrew Leigh Mp48sc on July 15, 2014

The Abbott Government is cutting thousands of staff from the Australian Taxation Office in the name of budget 'savings'. But there are real concerns these cuts will actually cost Australia millions more than they save through lost revenue.

MEDIA RELEASE

ATO STAFF CUTS MEANS MILLIONS IN TAX DODGES

The Abbott Government’s deep staff cuts at the Australian Tax Office (ATO) will result in a hit to the federal budget, with new evidence revealing every dollar cut from spending on staff will sacrifice up to $6 in unpaid tax.

The ATO shed 900 staff in the 2013-2014 financial year and will lose a further 2,100 staff by the end of October as part of the government’s drive for savings.

But figures revealed in hearings before parliament’s Standing Committee on Tax and Revenue indicate that the cuts may make it easier for businesses and individuals to avoid paying tax and end up costing the budget millions in uncollected revenue.

The 900 jobs shed over the past 12 months equates to $46 million in government spending. With every dollar invested in staff generating between $1 and $6 in revenue, this will cost the budget up to $276 million in lost revenue from unpaid tax.

The remaining 2,100 jobs on the chopping block are projected to save $143 million, but this may actually cost the budget more than $800 million in unpaid tax.

Combined, this means a total of anywhere between $189 million and more than $1 billion will be foregone in unpaid taxes as a result of this government’s cuts to the ATO.

This government’s ideological obsession with downsizing the public service has blinded it to the important work that ATO staff do in ensuring companies and individuals comply with their tax obligations.

When the cost of lost revenue is taken into account, it’s clear the government’s ‘savings’ will actually make the budget worse off – perhaps by up to a billion dollars.

Stephen Jones:I want to follow up on that issue about the revenue impact of staffing cuts and expand it out to your general appropriations. In the past, Mr Jordan, people in your position talked about the return on investment of the ratio of $1:$15-$20—that is, every dollar invested sees a return to revenue for government of somewhere between $15 and, some say, as high as $25…

Neil Olesen, Second Commissioner, Compliance Group, Australian Taxation Office:I would take issue with $25 or even 15:1. I think that would be a pretty good rate of return on things. In fact, it would be fantastic.

Stephen Jones:Where would you put the figure?

Neil Olesen:I think most of the investment proposals that I could bring to mind over the last decade would, say, be somewhere between 1:1 and 6:1. Something south of 10:1 in any case.”